Segment Information

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information

15. Segment Information

Anadarko’s business segments are separately managed due to distinct operational differences and unique technology, distribution, and marketing requirements. The Company’s three reporting segments are oil and gas exploration and production, midstream, and marketing. The oil and gas exploration and production segment explores for and produces natural gas, oil, condensate, and NGLs and plans for the development and operation of the Company’s LNG project in Mozambique. The midstream segment engages in gathering, processing, treating, and transporting Anadarko and third-party oil, natural-gas, and NGLs production. The midstream reporting segment consists of two operating segments, WES and other midstream, which are aggregated into one reporting segment due to similar financial and operating characteristics. The marketing segment sells much of Anadarko’s oil, natural-gas, and NGLs production as well as third-party purchased volumes.

To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; exploration expense; depreciation, depletion, and amortization (DD&A); impairments; interest expense; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; and certain items not related to the Company’s normal operations, less net income attributable to noncontrolling interests. During the periods presented, items not related to the Company’s normal operations included Deepwater Horizon settlement and related costs, Tronox-related contingent loss, and certain other nonoperating items included in other (income) expense, net. The Company’s definition of Adjusted EBITDAX excludes exploration expense as it is not an indicator of operating efficiency for a given reporting period. However, exploration expense is monitored by management as part of costs incurred in exploration and development activities. Similarly, DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.

Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures, and make distributions to stockholders. Adjusted EBITDAX as defined by Anadarko may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income or cash flows from operating activities. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
millions	2015			2014			2015			2014
Income (loss) before income taxes	$	(3,077	)	$	1,774		$	(7,520	)	$	506
Exploration expense	1,074			199			2,260			1,000
DD&A	1,111			1,163			3,581			3,335
Impairments	758			394			3,571			514
Interest expense	199			204			616			573
Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives	360			(276		)	374			324
Deepwater Horizon settlement and related costs	—			3			4			96
Tronox-related contingent loss	—			19			5			4,338
Certain other nonoperating items	—			22			22			22
Less net income attributable to noncontrolling interests	75			60			154			142
Consolidated Adjusted EBITDAX	$	350		$	3,442		$	2,759		$	10,566

15. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, results from hard-minerals royalties, and net cash from settlement of commodity derivatives. The following summarizes selected financial information for Anadarko’s reporting segments:

millions	Oil and Gas Exploration & Production			Midstream			Marketing			Other and Intersegment Eliminations			Total
Three Months Ended September 30, 2015
Sales revenues	$	1,067		$	195		$	968		$	—		$	2,230
Intersegment revenues	750			315			(832		)	(233		)	—
Gains (losses) on divestitures and other, net	(557		)	(22		)	—			37			(542		)
Total revenues and other	1,260			488			136			(196		)	1,688
Operating costs and expenses (1)	840			287			181			(14		)	1,294
Net cash from settlement of commodity derivatives	—			—			—			(79		)	(79		)
Other (income) expense, net (2)	—			—			—			47			47
Net income attributable to noncontrolling interests	—			75			—			—			75
Total expenses and other	840			362			181			(46		)	1,337
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—			(1		)	—			(1		)
Adjusted EBITDAX	$	420		$	126		$	(46	)	$	(150	)	$	350
Three Months Ended September 30, 2014
Sales revenues	$	2,192		$	119		$	1,919		$	—		$	4,230
Intersegment revenues	1,604			364			(1,774		)	(194		)	—
Gains (losses) on divestitures and other, net	724			1			—			55			780
Total revenues and other	4,520			484			145			(139		)	5,010
Operating costs and expenses (1)	1,090			249			188			26			1,553
Net cash from settlement of commodity derivatives	—			—			—			(48		)	(48		)
Other (income) expense, net (2)	—			—			—			2			2
Net income attributable to noncontrolling interests	—			60			—			—			60
Total expenses and other	1,090			309			188			(20		)	1,567
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—			(1		)	—			(1		)
Adjusted EBITDAX	$	3,430		$	175		$	(44	)	$	(119	)	$	3,442

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⁽¹⁾   Operating costs and expenses excludes exploration expense, DD&A, impairments, and Deepwater Horizon settlement and related costs since these expenses are excluded from Adjusted EBITDAX.

⁽²⁾   Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.

15. Segment Information (Continued)

millions	Oil and Gas Exploration & Production			Midstream			Marketing			Other and Intersegment Eliminations			Total
Nine Months Ended September 30, 2015
Sales revenues	$	3,493		$	560		$	3,399		$	—		$	7,452
Intersegment revenues	2,752			920			(2,977		)	(695		)	—
Gains (losses) on divestitures and other, net	(990		)	(19		)	—			202			(807		)
Total revenues and other	5,255			1,461			422			(493		)	6,645
Operating costs and expenses (1)	2,674			761			571			(110		)	3,896
Net cash from settlement of commodity derivatives	—			—			—			(251		)	(251		)
Other (income) expense, net (2)	—			—			—			87			87
Net income attributable to noncontrolling interests	—			154			—			—			154
Total expenses and other	2,674			915			571			(274		)	3,886
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—			—			—			—
Adjusted EBITDAX	$	2,581		$	546		$	(149	)	$	(219	)	$	2,759
Nine Months Ended September 30, 2014
Sales revenues	$	6,804		$	358		$	5,791		$	—		$	12,953
Intersegment revenues	4,947			1,010			(5,369		)	(588		)	—
Gains (losses) on divestitures and other, net	2,194			(2		)	—			148			2,340
Total revenues and other	13,945			1,366			422			(440		)	15,293
Operating costs and expenses (1)	3,128			732			555			51			4,466
Net cash from settlement of commodity derivatives	—			—			—			132			132
Other (income) expense, net (2)	—			—			—			(10		)	(10		)
Net income attributable to noncontrolling interests	—			142			—			—			142
Total expenses and other	3,128			874			555			173			4,730
Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement	—			—			3			—			3
Adjusted EBITDAX	$	10,817		$	492		$	(130	)	$	(613	)	$	10,566

 __________________________________________________________________

⁽¹⁾   Operating costs and expenses excludes exploration expense, DD&A, impairments, and Deepwater Horizon settlement and related costs since these expenses are excluded from Adjusted EBITDAX.

⁽²⁾   Other (income) expense, net excludes certain other nonoperating items since these items are excluded from Adjusted EBITDAX.